Exam 10: The Rational Consumer

Mario sees popcorn and pretzels as perfect substitutes. He is always willing to substitute 3 cups of popcorn for 1 cup of pretzels. If Mario consumes only popcorn, then we know that the relative price of popcorn in terms of pretzels is:

Use the following to answer questions: Figure: Kristin's Budget Line -(Figure: Kristin's Budget Line) Look at the figure Kristin's Budget Line. The price of a cup of cappuccino is $3, and the price of an apple is $1. Suppose Kristin initially consumes 10 cups of cappuccino and 30 apples. Then the price of apples increases to $3 each and the price of a cappuccino remains unchanged. As a result of this price change, Kristin's optimal consumption bundle changes, reflected by a decrease in the consumption of both apples and cappuccinos. This suggests that:

Use the following to answer questions: Figure: Consumer Equilibrium III -(Figure: Consumer Equilibrium III) Look at the figure Consumer Equilibrium III. The highest level of total utility attainable is associated with point _____ on _____.

The slope of a(n) _____ curve shows the rate at which two goods can be exchanged _____ the consumer's _____.

Use the following to answer questions: Figure: Harold's Indifference Curves The figure shows three of Harold's indifference curves for bread and cheese. -(Figure: Harold's Indifference Curves) Look at the figure Harold's Indifference Curves. If the price of bread is $0.50 per loaf, the price of cheese is $1 per pound, and Harold has $7 to spend on bread and cheese, Harold's optimal consumption bundle is _____ loaves of bread and _____ pounds of cheese.

Mr. Black always consumes coffee and cream in fixed proportions-8 ounces of coffee to 1 ounce of cream. This implies that for Mr. Black:

If potatoes are an inferior good and the price of potatoes decreases, the _____ effect will cause a(n) _____ in the consumption of potatoes.

One point on an indifference curve drawn between mangoes and vegetable broth is the consumption bundle consisting of five mangoes and three boxes of vegetable broth. This means that Sharri is indifferent between five mangoes and three boxes of vegetable broth.

If the marginal utility of hot dogs exceeds the marginal utility of french fries, then the consumer should always increase the consumption of hot dogs and decrease the consumption of french fries.

If the price of a good changes so that the income effect and the substitution effect reinforce one another, this means the good is:

Use the following to answer questions: -(Table: Madeline's Preferences for T-Shirts and Coffee) Look at the table Madeline's Preferences for T-Shirts and Coffee. Assume each consumption bundle provides the same level of utility for Madeline. Suppose Madeline is consuming bundle C. If she changes her purchases to bundle D, this means that she:

Use the following to answer questions: -(Table: Utility from Burgers and Milkshakes) Look at the table Utility from Burgers and Milkshakes. David's marginal utilities for milkshakes and burgers are given in the table. The price of milkshakes is $2, and the price of burgers is $5. If David's income is $10, to maximize his utility, he buys _____ shake(s) and _____ burger(s).

The optimal consumption bundle is the combination of goods that lies above the budget constraint.

Use the following to answer question: -(Table: Marginal Utility per Dollar II) Look at the table Marginal Utility per Dollar II. If Manuel has $18 to spend on potatoes and clams, then the utility-maximizing combination is _____ pounds of clams and _____ pounds of potatoes.

Use the following to answer questions: Figure: The Indifference Curve Map II -(Figure: The Indifference Curve Map II) Look at the figure The Indifference Curve Map II. Sara enjoys attending Chicago Cubs baseball games and eating baby back rib dinners. The figure shows two of her indifference curves for Cubs tickets and baby back rib dinners. If she consumes 20 baby back rib dinners and 6 tickets to Cubs games, she would be equally happy to give up 8 dinners for _____ more ticket(s) to Cubs games.

Use the following to answer questions: -(Table: Consumer Equilibrium) Look at the table Consumer Equilibrium. Assume that goods X and Y both cost $1 per unit and you have $7 to spend on both goods. To maximize utility, you would consume _____ units of X and _____ units of Y.

The amount by which an additional unit of a good or service changes a consumer's total satisfaction, all other things unchanged, is _____ utility.

Use the following to answer questions: Figure: Consumer Equilibrium IV -(Figure: Consumer Equilibrium IV) Look at the figure Consumer Equilibrium IV. Assume that you are consuming the combination of goods at point K. Given the budget constraint FL, utility can be increased by moving to point:

At Frankie's Buy-the-Slice Pizza, Brian eats eight slices of pizza, explaining that at only $2 per slice, the utility-maximizing decision is to eat until your marginal utility per dollar is zero. Brian's explanation is correct.

Steven consumes staples and paper clips. He is maximizing his utility in consumption of both goods. The price of paper clips rises. Assuming that diminishing marginal utility applies to both goods, as he adjusts to this event, the marginal utility of staples will _____, and the marginal utility of paper clips will _____.